Infrastructural gap financing in Nigeria: The role of sukuk financial instruments.
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Date
2012
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Volume Title
Publisher
College of Management Sciences, Al-Hikmah University
Abstract
The importance of infrastructure in the economic development of any country cannot be overemphasised. Infrastructural projects require a constant and dependable source of financing. This source of finance is expected to cover the medium to long term due to the long term maturity and large scale nature of the projects being undertaken. Amongst other side effects of the recent global financial crisis is the drying up of liquidity that would have been used in infrastructural financing. This and other post financial crisis has led to a call for a paradigm shift from the conventional financial monetary system to a system that is free from the problems inherent in the present system. One of such proposals is the introduction of the Islamic-based financial system due to the success that is being recorded in countries/ places where it is being practised. This paper discussed the importance and problem of infrastructural financing in Nigeria with a view to identifying the gaps therein. It also critically examined the Islamic financial bond known as ‘‘Sukuk’’ and what is obtained in Islamic based financial systems that have effectively utilised the ‘’Sukuk’’ financial instruments to overcome its infrastructural financing challenges. The paper identified that there exists an Infrastructural financing gap in Nigeria and based on this, the paper recommends, amongst other policy measures, that the Nigerian Government should intensify efforts aimed at promoting the issuance of Sukuk in the Nigerian Capital market.
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Keywords
Infrastructure financing, Financial crisis, Islamic Bond, Sukuk